Elixir Energy Ltd (ASX:EXR) has acquired a 100% interest in petroleum exploration permit ATP 2044 in Queensland, a move set to see the company take advantage of the current shortage in the global LNG market and particularly on the east coast of Australia.
The company will continue to pursue its existing natural gas and hydrogen projects in Mongolia in parallel with the new asset, which it says will provide shareholders with an opportunity to profit from the rapidly changing international and local gas market dynamics.
This acquisition, via special purpose vehicle EnergyCapture Pty Ltd, will be paid through a combination of cash of $500,000 and the issue of 20,703,934 Elixir shares worth about $3 million to the owners.
One-third of the shares will be held in escrow for nine months, another one-third for 18 months and the remaining one-third will be unencumbered. Elixir will also provide an over-riding royalty of 3% on hydrocarbon liquids production to the owners.
No need to raise funds
Elixir does not need to raise funds for the acquisition given its strong fiscal position, with cash of $22.7 million as noted in the recent June quarterly report.
Elixir managing director Neil Young said: “We are very pleased to have purchased a 100% interest in ATP 2044 - a Queensland-based asset that has very attractive characteristics in the current global and local energy market environments."
Favourable location
The ATP 2044 is very well located in the Taroom Trough, some 35 kilometres to the south of one of Australia’s main gas hubs at Wallumbilla. This hub connects by transmission pipelines to both the eastern states of Australia and international gas markets via the Gladstone LNG facilities.
Location of ATP 2044.
ATP 2044 is prospective for gas and condensate trapped in conventional and unconventional sandstones and fractured coals. These reservoirs are proven in the Taroom Trough, where the Daydream-1 well, situated about 3 kilometres west of the permit edge, flowed gas at rates of up to 3.5 million cubic feet per day.
The primary objective reservoirs are the sandstones and fractured coals of the Permian-aged Kianga Formation and Back Creek Group within the Bowen Basin. Elixir estimates the prospective resource potential of ATP 2044 as follows:
Elixir aims to drill a well in ATP 2044 in 2023 and plans to engage with other operators in the Taroom Trough who may have drilling programs in a similar time frame to coordinate work plans such as potentially sharing the same rig. The outcomes of the discussions will determine a more specific time frame for the company’s drilling.
Potential synergies with Shell and Santos
Young said: "Our team has considerable experience in Queensland, which in my view is one of the few locations in the world which could credibly supply new sources of LNG to a very short international market in the next few years.
“The east coast gas market is also facing material gas shortages as identified recently by the ACCC (Australian Competition and Consumer Commission) and the new asset accordingly has great optionality in potentially supplying either or both markets.
"The favourably-located asset sits adjacent to permits operated by both Shell and Santos and we will explore potential synergies to target this exciting play.
"Our Mongolian natural gas and hydrogen projects will continue undisturbed in parallel.”